Maersk to switch an Asia-U.S. East Coast string from Panama to Suez canal

Tuesday, February 12, 2013

Maersk Line will stop routing ships from East Asia to the U.S. East Coast ports of Savannah, Charleston and Miami through the Panama Canal in April, instead sending them through the Suez Canal.
The company's current Asia-East Coast TP7 string, which today uses the Panama Canal, will be combined with a Suez-routed Asia-Europe string, AE9, which will also stop in Tangiers on inbound voyages from Asia, and in Valencia on outbound voyages back to Asia.
William Woodhour, senior vice president and head of North American trades at Maersk Line, said it was "difficult for me to see how any service going through the Panama Canal that serves Asia to the U.S. East Coast could possibly be making money.”
Unlike Asia-U.S. services to the U.S. West Coast or to the East Coast using the Suez Canal, services using the Panama Canal have not been able to take advantage of the economies of scale that larger tonnage provides.
The largest ships that can transit the Panama Canal today carry about 4,500-5,000 TEUs. When the canal's expansion project is completed (now scheduled for 2015), ships of up to about 14,000 TEUs will be able to use the waterway.
The new TP7/AE9 service will operate with 11 7,000-TEU vessels currently deployed
on the AE9. The TP7 is currently using 4,000-TEU ships.
"This revision to the AE9, which has operated seasonally, will adjust our
Asia-Europe capacity before the introduction of the Triple E vessels
later this year. We had already decided not to operate the AE9 during
February and March, the slack spring season," Woodhour said.
With the two services combined, Woodhour said the equivalent of a Panamax capacity string from Asia will be removed.
The new rotation will be Ningbo, Shanghai, Yantian, Hong Kong, Tanjung Pelepas, (Suez
transit), Tangiers, Savannah, Charleston, Miami, Valencia, (Suez
transit), Kaohsiung, and Ningbo.
Other shipping executives agree that trans-Panama services from the Far East to the U.S. East and Gulf coasts via the Panama Canal have become money losers.
Fuel has gotten so costly that Gene Seroka, president of APL Americas, told attendees at a conference sponsored by the American Association of Port Authorities on “Shifting International Trade Routes” in January that “Today, nearly zero vessel strings going through the canal on an East-West transit basis make any money whatsoever."
Woodhour noted transpacific services to the West Coast have been able to take advantage of economies of scale that are not yet available to East and Gulf coast services with Panama Canal routings. At the beginning of 2008, the average size of ships calling among West Coast services was 5,077 TEUs, or 697 TEUs more than the average for ships using the Panama Canal, and 200 TEUs more than those using the Suez routings, according to BlueWater Reporting.
Today, there are ships with 10,000-13,000 TEUs of capacity serving the U.S. West Coast, Woodhour said, while ships serving the East Coast through the Panama Canal are still limited until the canal expansion is finished. Because of those larger size vessels, “we estimate that services to the West Coast have increased their economy by about 35 percent,” he added.
Woodhour said not only is the cost of bunker fuel rising, but many Panamax ships are older - built in the 1980s and 1990s - and are not as fuel efficient as more modern, post-Panamax tonnage.
He also said tolls at the Panama Canal have risen, and while yearly increases may seem modest, he explained when totaled over several years they can be significant.
Tolls were $42 per laden TEU in 2005 and $33.60 for ballast containers. Shipowners now pay $74 per TEU for each slot on the ship, plus $8 for each loaded container. Tolls are lower if a ship is ballasting. - Chris Dupin